MRT interviews Robert Shiver
INTERVIEW WITH ROBERT SHIVER
On Sept. 19, 2001, MRT’s editorial director, Don Bishop, interviewed Aerwāv and Securicor Wireless Chairman and Chief Executive Robert Shiver about Aerwāv’s planned acquisition of 220MHz spectrum, network infrastructure, voice and data subscriber equipment distribution, airtime sales and band manager business from Securicor. On Sept. 25, Aerwāv, a company that Shiver owns, signed a purchase agreement with Securicor Wireless.
MRT: One of the goals you’ve spelled out for Aerwāv is additional license acquisitions. Why would Aerwāv want to add to its license holdings, consolidating more 220MHz spectrum under its wing?
Shiver: One of the benefits of consolidating the 220MHz spectrum is that it opens up to our partners and us the ability to use alternative technologies and different infrastructure. We do intend on using additional infrastructure and different technologies given different market niches. We intend to support LM for 5kHz-wide channels. We also believe there are other applications and markets that may lend themselves to 6.25kHz-wide, 12.5kHz-wide and 25kHz-wide-channel infrastructure.
The advantage of our spectrum position is that we can pick and choose among these bandwidth infrastructures.
MRT: Have you selected manufacturers for the alternative technologies?
Shiver: We have no announcements to make of manufacturer arrangements.
MRT: Why do you want to be in the spectrum management business?
Shiver: Our premise is that spectrum is, and becomes, more valuable. Not much spectrum is left under 1GHz. Continuing to consolidate and manage spectrum within the 220MHz–222MHz band and potentially within the 217MH–222MHz band creates a host of opportunities that didn’t exist before.
Opportunities include partnering with manufacturers for use of the spectrum pipeline. Other partners could be end-users or content providers. One application might be meter reading. In the simplest form, we could lease spectrum to the partnership. Or our participation could see us building a customized network. We’re interested in whatever enables recurring revenue.
MRT: Are there any implications in the Aerwāv transaction for Securicor Wireless’ current partner, the National Rural Telecommunications Cooperative, or for the company’s dealers?
Shiver: We think Aerwāv’s plan enables partners to do more with their equipment. We think having more spectrum in a better configuration helps them. We want to be proactive in building partnerships and dealers. Having a wider spectrum pipeline will allow our partners and dealers to have a host of alternative equipment depending on the market they want to go after compared to what the pipeline has been corralled into.
MRT: How do you plan to meet the deadlines for the harmonized Phase I nationwide, Phase II regional and Phase II national licenses covered by the construction rule waiver granted by the FCC on Sept. 12?
Shiver: The FCC gave us the choice of meeting either the Phase I or Phase II deadline. We can harmonize those licenses into one of those choices. We probably will go with the one that says we have to have 12.5% of the U.S. population covered within a certain time frame.
We’re pretty much there. We’re doing the math on the coverage. We’re close to reaching 12.5% because we have most of California covered, plus Boston and New England. Within that footprint is our ability to finish the 12.5% coverage.
MRT: Why did you request the waiver?
Shiver: To build value, one has to have an efficient spectrum pipeline. Because of the history of spectrum auctions and so forth, there’s a hodge-podge of system construction requirements among our licenses. We asked the FCC to harmonize them with an efficient construction requirement. Then we intend to harmonize spectrum efficiently for our present and future holdings.
In the eastern United States, we cover from Boston to upper New York state. Florida also is a good market for us because it’s flat, and 220MHz propagates especially well there.
Our consolidation strategy and success allows us to be more economical in how we build markets. The strategy used to be to construct systems to hold the licenses and then figure out how to make money. Our own consolidation and the FCC trend toward consolidation are favorable to end-users because we can use sites the right way. We think there is a very efficient wireless highway being developed at 217MHz to 222MHz that will be of tremendous value to the community. Previously, it wasn’t useful because of a lack of capacity and alternative technologies.
MRT: Did Securicor keep Securicor Wireless from using alternative technologies? For example, did Securicor require Securicor Wireless to use LM for all of its systems?
Shiver: No. Securicor has been as good a corporate sponsor that we could ever think of. We view LM and its product line as one of our historical success factors in getting where we are today. We end up with an expanding, consolidated pipeline with a low cost of megahertz per population. Without that, we could not have acquired and held those licenses and delivered the services that we have in the past, given the narrow footprint of the original licenses. Separation from Securicor has little to do with building an efficient spectrum highway with alternative technologies.
MRT: Do you plan to continue using SEA as the original equipment manufacturer for Aerwāv LM equipment?
Shiver: Yes. And as a matter of fact, as we’ve been buying licenses in the past four years, we’re probably the largest user of SEA ACSSB base stations because we bought licenses with SEA customers and base stations. You see LM base stations and ACSSB base stations populating these licenses. I would characterize Securicor’s and Aerwāv’s management as giving birth to a new company with Securicor’s DNA all over it because our plan is much the same as what we would execute without a new company.
The reason Aerwāv has come about is Securicor’s success in acquiring security companies globally. Without them wanting to focus on that globally, we would continue to do what we’ve been doing under their banner.
MRT: Do you expect to make changes in the Kansas City operations center or possibly relocate it to another city?
Shiver: We don’t anticipate making changes in Kansas City. The facility we moved out of in July we had inherited when we bought Midland International’s U.S. sales and distribution business. Midland USA was a distributor of others’ products. After we sold first the consumer business and then the land mobile business, we didn’t need a 100,000-square-foot facility. We moved into a smaller, more state-of-the art facility to execute our plan. I expect them to stay where they are and expand to support our customer base.
MRT: You’ve said that a big part of Aerwāv’s strategy will be to serve as a band manager for 220MHz spectrum. How do you compare the band manager opportunity at 220MHz with the “guard band” manager opportunity at 700MHz?
Shiver: We believe in the near term, with the caveat that the FCC continues to promote and allow spectrum leasing services, that 220MHz is a better spectrum position because it is largely unencumbered and there is equipment ready to use. Our cost per pop per megahertz is significantly lower than the cost per pop per megahertz for the 700MHz band managers. And our 220MHz spectrum is national.
We have worked with the FCC and its Wireless Telecommunications Bureau in crafting the guard band, spectrum leasing and the secondary market. I believe the 700MHz guard band group will be hugely successful. But in creating a high-volume design, you have to have low cost.
If we didn’t think 220MHz was a better platform, we could have bid for those 700MHz guard band licenses. Our population per megahertz basis is between 10 and 12 cents. We believe that, under Aerwāv’s purchase agreement with Securicor Wireless, we will have a lower per pop per megahertz basis for the spectrum when you calculate that cost, the propagation advantage, not being encumbered and having equipment available. Both 700MHz and 220MHz have good prospects, long term, for rental. In the near term, we should hit the market sooner at lower cost.
Overall, I believe in the value of wireless real estate whether at 700MHz or 220MHz because there’s not much of it out there.
MRT: How has the timing of the FCC rule waiver that harmonizes construction requirements for the Securicor Wireless licenses affected the divestiture of Securicor Wireless? Was the contract signing awaiting the FCC ruling?
Shiver: Not at all. We’ve been working on it for quite a while. The plan that we will exploit as Aerwāv would be similar to Securicor Wireless’ plan. What created the opportunity for a new company is Securicor’s desire to focus on the acquisition of security companies.
What the waiver does is to continue to provide credible evidence that the FCC recognizes the need to get more efficient spectrum into the hands of the users. The horrible event at the World Trade Center has taken the reallocation of Department of Defense frequencies for commercial use off the table for a while. You can’t count on much spectrum being released by Department of Defense.
If you take a long view of the value and use of spectrum, especially under 1GHz, and you believe that the wireless world will grow, you have to believe in the long-term value of spectrum. The gamble is how quickly spectrum can be deployed and where the market niche is. Aerwāv has taken the middle ground. We’re not the best at predicting product and service within a period of time. We are taking a gamble that our expanding spectrum pipeline can and will be used in those opportunities if we take steps now to preserve the value of the spectrum.
The construction requirements for our licenses are historical in nature, and we are proactive in taking economical steps to harmonize them. What’s important is where you spend money to create value for the United States and the consumer. The FCC doesn’t think the priority lies in requiring certain construction for each license instead of a unified requirement for all of our licenses together to allow a more efficient use of capital to deliver services to the customer. We’re making a big bet on it.
